You've about got it.
Duality is maintaining at least two characters that are supposed to be completely separate by nature - i.e., they have different mannerisms, they hold different positions in different places, they have different names, and they are subject to different laws (that last part is what causes problems).
A good example is Fedele. He operates the character Scardino as a General of Lone Wolves United, a raider organization. Yet here, he operates Fedele, current Minister of Culture and Education, in a defender region. The two characters are completely different from one another, yet he keeps them completely separate - to the point he will occasionally have conversations with himself on IRC.
A bad example (since it's the one we're discussing) is Fulhead. He operates a nation in TNP (Fulhead Land) and the Lexicon (Lexiconhead). He uses a single character to control both, yet claims duality due to the fact that there are two nations in two regions. In claiming duality, he claims that Lexiconhead is not subject to TNP's laws - if the nations were completely separate as are Fedele's, we may not argue the fact. THe problem is that he does not differentiate between the two. As you stated, he should have two different personas that make little or no mention of one another.
^ More-or-less summary of the entire topic.